Pulse of the Street: Small-caps steal the show as equities extend gains | Stock Market News

Indian equities ended the week higher, supported by gains in capital goods, metals, automobiles and information technology stocks, even as small-caps comfortably outpaced the broader market.

The Sensex closed on Friday 0.58% lower at 78,499.19, while the Nifty 50 declined 0.27% to 24,570.65. Despite the weak finish, the benchmarks gained 0.51% and 0.76%, respectively, during the week.

The market sentiment during the week was also shaped by the rollout of a new trading mechanism. Monday saw an unusual divergence as the first stock derivatives expiry aligned with the equity market's closing auction, triggering a nearly 200-point surge in the Nifty during the final two minutes.

Market participants attributed the discrepancy to limited participation by arbitrageurs in the new framework mandated by the Securities and Exchange Board of India.

On the sectoral front, capital goods and metal stocks led the weekly gains, with the respective indices rising 3% each. The BSE Auto Index advanced 2.9%, while the BSE IT gained 2.7%, extending information technology stocks' recent recovery.

The rally, however, was not broad-based. The BSE Realty Index declined 1.7%, making it the week’s worst-performing sector. Utilities fell 1.3%, while the oil and gas index slipped 0.5%.

Alok Singh, chief investment officer at Bank of India Mutual Fund, attributed the sectoral divergence largely to earnings trends. Capital goods and metal companies delivered stronger-than-expected results, helped by the investment cycle and commodity prices, while automobile companies benefited from recovering demand and stable margins.

“The rebound in IT was driven more by technical factors and oversold conditions than by earnings surprises. Capital goods, automobiles, PSU banks and metals could sustain their momentum in the near term,” Singh said.

Broadening the sectoral perspective, Ashwini Shami, president and chief portfolio manager at OmniScience Capital, said capital goods and infrastructure companies reported expanding order books and healthy execution in the June quarter.

“Easing geopolitical tensions in West Asia have stabilized commodity prices and could reduce input costs for automobile and metal companies,” Shami said. He added that utilities had become more attractively valued following their recent underperformance, while rising electricity demand supported the long-term growth prospects of the power ecosystem.

Along with sector-specific strength, market participation was further boosted by a surge in the small-cap space. Small-cap stocks comfortably outperformed their larger peers. The Nifty Smallcap 250 climbed 2.4% during the week, compared with gains of 0.9% each for the Nifty Largecap 100 and Nifty Midcap 100.

The latest rise extended a sharp rally that began at the end of March. The Smallcap 250 has gained nearly 30% since then, compared with advances of about 20% in the Midcap 100 and 12% in the Nifty 100.

Though Shami cautioned that the rally had altered the risk-reward equation. “At current valuations, large-caps offer a better risk-reward proposition than small- and mid-cap indices,” he said.

Singh said small-cap companies had delivered stronger-than-expected earnings during the ongoing results season, creating room for upgrades that could support current valuations in the near term. Healthy domestic demand and government policy support had also aided the segment, he added.

On the global stage, India lagged several major global markets during the week. The Nifty 50’s 0.8% rise paled against the Nasdaq Composite’s 3.8% surge. Among Asian markets, Jakarta gained 2.8%, Taiwan advanced 2.6%, and Japan’s Nikkei 225 rose 1.9%.

India, however, fared better than South Korea, where the Kospi slumped 5.1%. Brazil’s Bovespa and Hong Kong’s Hang Seng declined 1.4% and 1%, respectively.

Singh attributed India’s relative underperformance to moderating earnings, the absence of a strong artificial intelligence-led theme and the greater impact of elevated crude oil prices.

“As these headwinds ease and earnings stabilize, the country's underweight position in global portfolios could attract foreign inflows,” he said.

Shami also expects foreign portfolio flows to improve, citing the Nifty 50’s forward price-to-earnings multiple of about 19 times and expectations of double-digit earnings growth beyond FY27.

Mayur Bhalerao is a markets reporter at Mint with around 12 years of experience across finance and media. His coverage focuses on Indian equities, IPOs and broader market trends, tracking developments across large-cap, mid-cap and small-cap stocks as well as shifts in investor behaviour among retail investors, mutual funds and foreign portfolio investors.<br><br>Mayur’s reporting emphasises data-driven analysis of market movements, valuations and sectoral trends. He uses shareholding disclosures, financial filings and market data to explain developments on Dalal Street and examine how global events and domestic policy changes—including geopolitical tensions, crude oil prices and regulatory decisions—shape Indian equities and investor sentiment.<br><br>He regularly uses financial databases such as the Bloomberg terminal and Capitaline to produce data-intensive stories, analysing company disclosures, ownership patterns and sectoral trends across both Indian and global markets. He also supports colleagues in the newsroom by providing database-driven insights and market data analysis that help strengthen broader market coverage.<br><br>Before joining Mint, Mayur worked at Informist Media Pvt Ltd., a leading financial newswire, where he developed his expertise in financial journalism in a specialised markets newsroom.

Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.